The company released its 2023 annual report: During the reporting period, the company achieved revenue of 4.304 billion yuan (YoY +6.5%), net profit of 503 million yuan (YoY +1.9%), net profit of 499 million yuan (YoY +2.5%) after deducting non-attributable net profit of 499 million yuan (YoY +2.5%). The performance was in line with expectations. Among them, 23Q2 achieved revenue of 2,246 million yuan (YoY +2.7%, QoQ +9.2%) in a single quarter, achieved net profit of 275 million yuan (YoY +1.6%, QoQ +20.7%), deducted non-attributable net profit of 274 million yuan (YoY +3.0%, QoQ +21.9%). The performance was in line with expectations. 23Q2 The company's gross sales margin was 25.75%, down 1.41 pct from the previous year, up 2.47 pct from the previous month, the net profit margin was 12.25%, down 0.26 pct from the previous year, and up 1.19 pct from the previous year.

23H1 Fluorine-containing gas sales increased, fluorine rubber prices fell, benefiting from a sharp decline in the prices of some raw materials, and a steady increase in the company's performance. 2023H1, the company's PTFE achieved revenue of 503 million yuan (YoY -18%), sales volume of 13,900 tons (YoY -8%), average sales price of 36,000 yuan/ton (YoY -11%); fluorine rubber achieved revenue of 84 million yuan (YoY -35%), sales volume of 804 tons (YoY +5%), and average sales price of 104,400 yuan/ton (YoY -38%); fluorinated gas achieved revenue of 298 million yuan (YoY +10%), sales volume of 2815 tons (YoY +21%), average sales price 106,000 yuan/ton (YoY -9%); rubber sealing products achieved revenue of 126 million yuan (YoY%+11), sales volume of 4.61 million units (YoY -1%), average sales price of 272,900 yuan/10,000 pieces (YoY +12%); special coatings achieved revenue of 260 million yuan (YoY% +10), sales volume of 0.67 million tons (YoY +6%), average sales price of 39,000 yuan/ton (YoY +4%); new polyurethane materials achieved revenue of 1.41 million yuan (YoY +5), sales volume 0.64 billion yuan 10,000 tons ( YoY%+10), with an average sales price of 21,900 yuan/ton (YoY -5%); special tires achieved revenue of 89 million yuan (YoY -8%), 171,000 strips (YoY%-10), and an average sales price of 0.52 yuan/strip (YoY +7%); additional PVDF revenue of 28 million yuan, sales volume of 511 tons, and average sales price of 55,600 yuan/ton. In 2023H1, the average purchase price of the company's main raw materials: epoxy resin (YoY -46%), trichloromethane (YoY -42%), MDI (YoY -14%), cigarette gum (YoY -12%), hydrofluoric acid (YoY -11%), xylene (YoY -10%), polyether polyol (YoY -8%) prices fell, raw rubber (YoY +4%), TDI (YoY +4%) prices rose. Furthermore, in the 23Q2 quarter, the company's product sales volume changed: PTFE (QoQ +9%), fluorine rubber (QoQ +3%), fluorine gas (QoQ -6%), rubber sealing products (QoQ -7%), special coatings (QoQ +75%), new polyurethane materials (QoQ +8%), and special tires (QoQ +48%).

Project construction is progressing steadily to support development. It is proposed to acquire 100% of Sinochem Blue Sky's shares to accelerate the integration of the fluorine chemical industry chain. As of 2023H1, the company's projects under construction amounted to 1,360 million yuan, an increase of 300 million yuan over the end of 2022. According to the report, the Haohua Gas 4,600 tons/year electronic gas project and the Zhonghao Chenguang 2,500 tons/year PVDF project have been completed and put into operation, and are actively promoting product production and market development. Industrialization projects such as the Shuguangyuan 100,000 tires/year civil aviation tire project, the Southwest China Clean Energy Catalytic Material Industrialization Base Project, and the Northwest Hospital silicone sealing profile project are under construction and are scheduled to be completed and put into operation by the end of the year. Zhonghao Chenguang's 26,000 tons/year high-performance organic fluorine material project at the Yantan base has entered a critical construction period. Earlier, the company issued a report on issuing shares to purchase assets and raise supporting capital and related transactions (draft): 1) The company plans to issue shares to Sinochem Group to purchase 52.81% of its shares in Sinochem Blue Sky and purchase 47.19% of Sinochem Blue Sky's shares from Sinochem Asset Issuance Shares; 2) The company intends to raise no more than 7,243.8634 million yuan in supporting capital for the “new 20,000 tons/year PVDF” project. Projects such as the “ton/year lithium-ion battery electrolyte project (phase I)”, the “annual output of 19,000 tons of VDF, 15,000 tons of PVDF and supporting 36,000 tons of HCFC-142b raw materials (phase II)”, and “supplementary liquidity or debt repayment”. Sinochem Blue Sky has been deeply involved in comprehensive fluorine chemical research for more than 70 years. Currently, it is mainly engaged in R&D, production and sales of fluorine lithium battery materials, fluorocarbon chemicals, fluoropolymers and fluorine fine chemicals. The products cover almost the entire fluorine chemical industry chain. Among them, R123 products are exclusively produced globally, with 70,000 tons of R134a and 30,000 tons of R125 products ranking in the top three global market shares. The current integration of China Sinochem's internal resources and strong alliances will further improve the layout of Haohua's fluorine chemical industry.

Investment analysis opinion: Considering the decline in the prices of some products, the company's net profit forecast for 2023-2025 was lowered to 1,197, 14.37, and 1,779 billion yuan (the original forecast values were 1,280, 15.73, and 1,951 billion yuan; note: none of them took into account Sinochem Blue Sky and listed). The current market capitalization corresponding to PE is 24, 20, and 16X respectively, maintaining the “increase in holdings” rating.

Risk warning: 1) the release of new production capacity fell short of expectations; 2) product prices fell sharply; 3) raw material prices rose sharply.